Ask John: Is Geneon Stopping DVD Distribution the Beginning of the End?

Question:
With the Geneon announcements, is the anime industry really in that bad of shape in the US? I know they’ve never been pulling in profit hand over fist, but is this the first sign that everything’s coming apart? Are ADV and Funimation in as dire straits as Geneon (apparently) was?

Answer:
I doubt that anyone apart from current and former Geneon employees know precisely why Geneon USA has decided to cease distributing anime in America. However, I think it’s safe to assume that the company wouldn’t have drastically altered its business model if its anime DVD distribution business was very profitable. I can’t say whether Geneon’s announcement is an isolated incident or the beginning of a domino chain. In fact, outsider observers don’t even know for certain that Geneon’s move was influenced at all by situations in the American anime community or American consumer market.

Industry observers have realized for some time that sales growth for America’s anime industry seemed to peak in 2003 and 2004. Signs of weakening foundation in America’s anime industry were evident by 2005. One of those signs was Geneon downsizing by a dozen employees. But I doubt that anyone knows the exact financial condition of America’s anime industry because America’s core anime distributors don’t reveal their balance books to the public, or to each other. As of 2006, Geneon was America’s third largest anime distributor in terms of market share, but even for third place, Geneon titles only accounted for 11.1% of annual American anime DVD sales. AD Vision’s 2006 market share was only marginally larger, at 12.6% while FUNimation accounted for 23.2% of all American anime DVD sales.

Perhaps more importantly, FUNimation and AD Vision both have perpetually popular tent pole titles including Dragon Ball Z and Evangelion that consistently bring in profits. And both FUNimation and AD Vision have branched out into related ventures like publishing and operating TV networks to serve as supplemental revenue sources. In recent years Geneon’s Hellsing Ultimate has been a major release, but two DVDs and long delays between releases may not have generated enough sales to offset expensive anchors. Select fans in America’s hardcore otaku community may respect Geneon for acquiring and releasing highly respected titles such as Kamichu, Strawberry Marshmallow, Bottle Fairy, Ayakashi, Zipang, Rozen Maiden, and Hajime no Ippo. But titles in these genres simply don’t sell well in America. Furthermore, investing in multiple titles like Shonen Onmyouji, Human Crossing, Elemental Gelade, and Law of Ueki – titles with minimal American commercial potential – and investing in the high cost of dubbing all of these titles and producing expensive, fancy limited edition versions of many of its titles may have resulted in the company spending more than the profits generated from DVD sales.

That, at last, routes the discussion from speculation to action. If American anime distributors stop releasing DVDs in response to poor sales, responsibility has to be laid at the feet of consumers – specifically America’s anime fans. If America’s anime fan community doesn’t support the anime industry, no one will. America’s anime distribution industry may be just as culpable as the fan community for devaluing anime: the industry, by constantly slashing the price of anime DVDs in search of more profits and in the process encouraging consumers to stop paying prices for anime that can sustain the industry; fans, by using unauthorized copies, downloads, and fansubs as a replacement for legitimately supporting the anime industry. I do believe that fansubs are a useful and valuable form of grassroots promotion, but when they’re abused and mis-used, the long-term results for all anime fans can be, obviously, significant and devastating.

My gut instinct is that Geneon USA may not be the last of America’s major anime distributors to stop licensing and distributing anime in America within the not-too-distant future, but most of America’s anime distributors do seem to be on solid, sustainable financial footing. Licensing and distributing anime is an especially expensive business that operates on very slim profit margins. So even small declines in sales can have a noticeable impact on distributors. But many of America’s anime licensors are, and have been, taking steps to solidify their sustainability, including cutting dubbing costs by releasing niche titles subtitled only, branching out into supplemental markets, restraining the tendency to flood the market with cheap re-releases, and reducing speculative and rampant licensing. Geneon’s situation implies that America’s anime industry is still on thin ice. While the industry may continue to contract, I don’t anticipate that it will ever entirely sink. And fans have much more influence over the health of America’s anime industry than they may realize. It doesn’t take a staggering number of sales, or a lack of a staggering number of sales, to make an anime DVD release a success or failure. Purchasing official American anime DVDs isn’t just a way of collecting favorite shows; it’s a literal contribution to the artists that create anime, and a literal contribution to keeping America’s anime industry healthy and active. I don’t think that America’s anime industry is literally on the verge of wholesale collapse, but fans who don’t want to face that risk should make a personal effort to help the industry that they love.